From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Paper 3- Regulation of e-commerce sector
The article highlights the risk of stifling the e-commerce sector due to the government’s propensity for its regulation to protect the local traders.
Efforts to shield local retailers
- India began to open up its economy three decades ago, but efforts to shield local retailers resulted in a retail sector fraught with a thicket of rules.
- With the web’s reach expanding rapidly, online retail is expected to grab a fast-widening slice of a pie placed at above $880 billion last year and projected at $1.3 trillion in 2024.
- Such a huge opportunity has set the stage for a grand e-com confrontation, with our two biggest business houses gearing up to take on a duopoly of US-based Amazon and Walmart-owned Flipkart.
- The more fiercely e-com is contested, the tighter this sector’s straps seem to get.
What are the new regulations?
- The Centre put out proposals to tighten e-com regulations for consumer protection.
- E-com firms must appoint resident officers to address grievances and monitor rule-compliance, and then be ready to share information sought by authorities within 72 hours.
- For the sake of “free and fair competition”, they must label all wares on their websites by country-of-origin, offer local alternatives, keep search results unbiased, not sell anything to anyone registered as a ‘seller’ with them, not conduct deep-discount flash sales of cherry-picked products.
- Restriction on aiding associated enterprises with any helpful data gleaned by their algorithms.
- As another measure to assure small enterprises an even field, they must also ensure that their logistical systems support all sellers in the same category equally.
- As it happens, this attempt to straitjacket e-com platforms coincides with an antitrust probe of ‘unfair practices’ ascribed to Amazon and Flipkart.
Issues with regulations
- Some of these sound too vague and subjective to adopt.
- Even if clear criteria are specified for their adoption and they actually serve to curtail brand favouritism, they would leave e-com majors with too little autonomy to devise strategies of service differentiation for a competitive edge.
- The perception of e-com majors being bullies, however, does not seem very widely shared among their customers, few of whom complain of either insufficient rivalry or choice deprivation online.
What e-com users are now at risk of suffering, though, is a hobbled industry. If all e-com websites are forced into a statist mould meant for generic market platforms, these companies could lose their ability to set themselves apart, outperform rivals and serve the market’s ultimate cause.